Passengers at Palma Son Sant Joan Airport, Mallorca

European tourism markets likely to be hit by recessionary forces. | Archive

Andrew EdePalma15/03/2023 07:40
TW
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The technical director of the public-private Fundació Impulsa for Balearic competitiveness, economist Antoni Riera, believes that the collapse of Silicon Valley Bank and Signature Bank jeopardises forecasts for economic recovery. Indications were that the risk of recession had receded, but there is now renewed and high uncertainty with the potential for a direct impact on the Balearic economy.

Riera points out that the first direct impact will be on the financial system and not so much on the real economy. However, economic growth forecasts for the Balearics, given this highly volatile situation, "will be affected if the situation does not change in the short to medium term".

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The assessment at Banca March is that "the risk of recession increases, because the increase in the cost of credit and the deterioration of financial conditions will push growth downward". The deterioration of financial conditions, says the bank, "occurs at a time when the loan market was giving the first signs of slowing down and commercial banks were already increasing restrictions to the granting of loans to companies and for homes".

Forecasts for the tourism season have been very positive; there has even been talk of a record season to surpass 2018. But Riera warns that if the crisis sparked off in the US is extrapolated to the European banking system and the economies of the tourism source markets, "there will be a correction and a deterioration in the outlook".